XRP ETF Race Heats Up: Canary Capital Joins the Fray – But Will It Get the Green Light?

October 10, 2024
A representational image of court ruling
A representational image of court ruling

Canary Capital has officially entered the competitive landscape of cryptocurrency ETFs by filing for a spot XRP exchange-traded fund (ETF). This move, announced just days after Bitwise submitted a similar application, has intensified speculation about whether the U.S. Securities and Exchange Commission (SEC) will approve either of these filings.

This application, submitted on Tuesday— just a week after Bitwise’s similar move—marked growing interest in offering investors exposure to XRP without needing to hold the asset directly. However, the likelihood of approval by the SEC remains debatable, especially given the ongoing legal challenges surrounding XRP.

Canary Capital’s proposal aims to expose investors to XRP through a traditional brokerage account, eliminating the challenges of acquiring and holding the cryptocurrency directly. According to the filing, the ETF would track the price of XRP using the Chicago Mercantile Exchange (CME) CF Ripple index, a real-time price benchmark. The firm emphasized that the fund would not use derivatives to track the cryptocurrency’s price, avoiding potential counterparty and credit risks often associated with such products.

Canary Capital highlighted that the fund’s structure could enable investors to implement strategic and tactical asset allocation strategies involving XRP efficiently. However, key details, including the identity of the custodian for the ETF and the ticker under which it would trade, have yet to be disclosed.

Experts like Alex Thorn, head of research at Galaxy Digital, have expressed skepticism about the ETF’s success if the SEC proceeds with its appeal against Ripple. Thorn mentioned that if the SEC follows through with its challenge, the “likelihood of this ETF filing succeeding drops to near zero” due to regulatory uncertainty. This legal battle, stemming from the SEC’s classification of XRP as an unregistered security, casts a shadow over the potential approval of any XRP-related ETFs.

Bloomberg Intelligence ETF analyst Eric Balchunas also weighed in, suggesting that political factors, such as the outcome of the 2024 U.S. elections, could play a pivotal role in determining the fate of XRP ETFs. He argued that under a more crypto-friendly administration, the chances of approval would increase significantly, whereas continuing the current regulatory approach would likely delay any progress.

Nate Geraci, president of the ETF Store, on the other hand, remained optimistic, underlining that approval is a “matter of when, not if.” However, he echoed concerns that regulatory clarity might take longer to achieve unless there’s a change in leadership or policy direction at the SEC. The firm’s appeal against Ripple has led many to believe that resolving the legal battle will be essential before any XRP ETF can move forward.

The broader market remains cautious. Since the filings, XRP’s price has shown little reaction, reflecting investors’ wait-and-see approach. Despite the enthusiasm around potential XRP ETFs, the regulatory environment will likely determine when or if these funds will be approved.

Overall, while Canary Capital and Bitwise’s applications represent a step forward for XRP, the uncertainty associated with the SEC’s actions remains a significant hurdle to their approval.

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Lawrence does not hold any crypto asset. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.

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